November 1, 2018 Japan and US sign Country-by-Country Reporting exchange of information arrangement The competent authorities of Japan and the United States (US) signed, on 12 October 2018, an arrangement for the exchange of Country-by-Country (CbC) Reporting (CbCR). The arrangement entered into effect on the same date. Scope and timing of CbCR exchange Japan's National Tax Agency and the US Internal Revenue Service will exchange each CbC report received that indicates in its content that one or more of the group entities is resident in the other jurisdiction. The CbCR exchange will take place annually on an automatic basis. The first envisaged exchange relates to CbC reports prepared with respect to the fiscal years of multinational enterprise (MNE) groups commencing on or after 30 June 2016. This first exchange must be performed no later than 18 months after the last day of the fiscal year of the MNE group to which the CbC report relates. CbC reports with respect to fiscal years commencing on or after 30 June 2017 are intended to be exchanged as soon as possible but no later than 15 months after the last day of the fiscal year. No need for local filing of CbC report in Japan For years commencing on or after 1 April 2016, Japanese domestic legislation includes CbCR-related requirements for MNE groups with total consolidated revenue for the preceding fiscal year of more than 100 billion yen. Subsidiaries or permanent establishments in Japan which are part of such an MNE group are required to locally submit the CbC report in the absence of an agreement with the respective competent authority. As a result of the signing the automatic exchange of information agreement, there is no obligation for US-headquartered MNE groups to locally file the CbC report in Japan, given that the US-based Ultimate Parent Entity (UPE) will submit the CbC report to the US competent authority. For fiscal years commencing on or after 1 April 2016 up to 30 June 2016, there is no requirement for local filing of the CbC report in Japan for US-headquartered MNE groups due to an exemption covering this period for cases where there is not yet a qualifying competent authority agreement between Japan and the country where the UPE is located. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young Tax Co., Tokyo
Ernst & Young LLP, Japanese Tax Desk, New York
——————————————— PDF version of Tax Alert 2018-2187
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